Can GBPUSD Hold on to Support as the EU Hints at Compromise in Brexit Issues?

GBPUSD was one of the biggest losers in yesterday’s trading. The currency pair dropped by over 0.80%, closing 101 pips below its opening price at 1.2418. However, despite yesterday’s performance, recent fundamental developments on Brexit negotiations could help the currency pair attract bids in today’s trading.

According to Financial Times, the European Union (EU) has expressed its willingness to provide more favorable conditions to the UK. In the past, the organization adopted a hard-line stance in preventing the UK from having competitive advantage for its businesses. The EU has previously strongly pushed for a “level playing field.” However, reports now say that the organization is now more amenable to discussing how it could align with the UK in this specific issue.

This development should be bullish for GBPUSD. A Brexit deal would limit the risks to the British economy significantly more than a no-deal Brexit deal would. However, whether it would be enough to push the currency pair higher in today’s trading or not, we will have yet to see.

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GBPUSD Outlook

On the daily time frame, GBPUSD can be seen retesting its previous trendline from connecting the lows of March 20, May 18, and May 26. When you enroll in our free forex trading course, you will learn that sometimes previous support levels turn into resistance. Further supporting this assumption is the fact that the 100 SMA and 38.2% Fib level (drawing the Fibonacci retracement tool from the high of June 10 to the low of June 22) coincide with the previous trendline around 1.2517.

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A closer look at the 4-hour time frame would show, however, that GBPUSD is currently testing the 200 SMA for support. Now, if it does not hold, we could soon see the currency pair fall to its June 22 lows at 1.2334. On the other hand, reversal candles around its current price may mean that there are still buyers in the market. We could soon then see GBPUSD test the 100 SMA on at 1.2570 for resistance.More content